Indian Banks need to raise Rs270,000 crore equity capital by March 2017 as stipulated by the Reserve Bank, which has been seeking to enhance both the quantum as well as the quality of capital of Indian banks.
RBI's proposed guidelines on Basel III, if implemented, will strengthen the Indian banking sector and increase its resilience to systemic shocks, says ratings agency CRISIL.
Its guidelines are more stringent than the proposed guidelines of the Basel Committee on Banking Supervision (BCBS), in terms of higher requirement of common equity capital, stricter leverage ratios, and shorter time span for implementation.
Despite the increased stringency in the guidelines, Indian banks are comfortably placed to migrate to the new guidelines by the desired timeline of March 2013. However, they will face the challenge of raising additional capital to maintain their growth on an ongoing basis.
As per the proposed guidelines, the amount of capital that banks need to maintain to adhere to the mandatory regulatory threshold has been raised. Capital adequacy ratio will increase by 2.5 per cent to 11.5 per cent by March 2017.
For the first time banks will need to maintain a leverage ratio, which will limit their ability to leverage.